After breaking through the 200-dollar barrier, the rupee failed to take a breather on Friday, falling to 201 against the greenback in inter-bank trading.
This was due in part to a lack of clarity from the International Monetary Fund (IMF) as well as looming political and economic uncertainty.
Talks are underway between the global lender and Pakistan to resurrect a $6 billion bailout program that is expected to cushion the country’s dwindling economy and falling rupee.
However, the foreign exchange market appeared to dismiss this update, as well as strong current account data for the month of April 2022, and the local currency’s downtrend continued.
Since April 30, the local currency has been falling as market confidence has been eroded by fears of depleting foreign exchange reserves, the suspension of the IMF program, and the continuation of fuel subsidies.
It was also revealed on Thursday that the State Bank of Pakistan’s (SBP) foreign exchange reserves fell by $145 million between May 6 and May 13 to $10.16 billion, remaining less than 1.5 months of import cover.
According to Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company, the current rupee fall is solely due to economic and political uncertainty.
“If the rupee is still on a decline despite a robust current account number, then it is only due to turbulence in the economy,” he said. “Moreover, lack of developments regarding the resumption of the IMF program has depleted the confidence in the foreign exchange market.”
To read our blog on “Dollar smashes historic highs, hitting Rs. 200 in the open market for the first time,” click here.